Get the Pulse of the Market with StreetInsider.com's Pulse Picks. Get your Free Trial here.

By Cecile Lefort

SYDNEY - An unprecedented shortage of air cargo space, after years of booming exports to Asia, is forcing Australian producers of top-end foods to potentially miss out on hundreds of millions of dollars in sales of everything from lobster to cherries.

Australia has been pushing to become the 'delicatessen of Asia', tapping its favorable climate to send crates of luxury produce such as figs and edible flowers to store shelves across the increasingly-affluent region.

But finding space on planes has become a headache as producers of delicacies crank up output, with suppliers saying the crunch has been exacerbated as freight carriers are prioritizing higher-margin shipments of beef and milk.

"Getting air space is our biggest challenge because we are in this market only six weeks per year (after picking)," said Lucy Gregg from Tasmania-based cherry grower Reid Fruits. "It's not much bargaining power."

David Minnis, a veteran fruit and vegetable exporter in Melbourne, said growers of such produce were losing out on up to A$100 million ($76 million) in potential sales to Asia per year - a figure that does not include similar missed opportunities in seafood and other fresh foods.

"Air freight is very important to us because some produce, like cherries, asparagus and peaches, can't go by sea," he said.

Australian fruit can take two days to get to supermarket shelves in China by plane, compared to around two weeks by water.

All up, exports of Australian rural goods - which include meat, fruits, vegetables and cotton sent by sea and air - were valued at A$42.7 billion in the 12 months to August, up 37 percent from five years ago, government statistics show. That accounts for about 13 percent of the nation's total exports.

SPACE SQUEEZE

The squeeze in space comes despite numbers from data provider MariTrade showing that Australian air freight export volumes nearly doubled in four years to 35,000 tonnes in June.

But high-end food producers say that increase is not keeping pace with growing appetite for their products from Asia's middle class. The shortage is particularly acute when demand peaks around Christmas and the Lunar New Year.

Some in the air transport industry said that boosting flight numbers further was not easy due to aviation quota restrictions, while starting new routes involves considerable risk for airlines.

"If you are repositioning a $100 million aircraft, it's a big decision," said Phil Gregory, general manager of Wellcamp Airport, a A$200 million privately built air freight facility in the agriculture-rich state of Queensland.

Cathay, which operates two dedicated freight vessels between Hong Kong and Australia every week, will start a weekly cargo service next month from Wellcamp.

Still, exports of higher-margin products such as beef can take precedence. While fruits and vegetables cost around 70 to 80 Australian cents per kilo to ship by air, frozen beef fetches nearly double.

Typically using an agent as an intermediary, small producers such as cherry growers can start negotiating with airlines for cargo space nearly a year ahead of the picking season.

Yet, there is no guarantee of room on planes as crop estimates can sometimes be well below production numbers, and airlines can also bump off small shipments of fruits or vegetables with only a day's notice to load higher margin products.

Greg Milner, a grape grower in the southern state of Victoria, said the industry was losing market share to foreign competitors due to the freight shortage.

"When there is a gap in the chain (with Asian supermarkets), others move in and it's a problem for us," he said.